American companies have long been influenced by the philosophy of
consumer needs and wants, but this is no longer sufficient for
successful marketing. Every firm should have a customer component, but
this alone will not allow a firm to develop a competitive advantage. The
customer is only one of many potential resources available to an
organization to achieve its end.

The American marketing response to international competition
continues to advocate a functional approach to marketing in which
meeting these customer needs and wants is perceived as the way to
achieve success. Other disciplines focus on other goals. Financial
analysts advocate maximizing stockholder wealth as a way to create a
competitive advantage. Economists tell us that supply and demand dictate
a firm's ability to create an advantage, while human resource
specialists teach that maximizing human resources creates the difference
between success and failure. This has created an environment where each
group's philosophical framework is counterproductive when placed
next to an opposing functional view.

The authors do not reject any of these functional applications, but
instead see them as resources (means) rather than philosophical ends in
themselves. All of these functions are required to develop a corporate
strategy, but the artificial boundaries between them are
counterproductive.

Marketing and Customer Orientation

It is difficult to find a marketing principles or management textbook
that develops any approach other than an identical historical evolution
of the marketing concept/orientation (such as Kotler and Armstrong
1989). Authors invariably trace marketing practice from production to
product to sales to the marketing concept--and now to a societal
marketing concept. This has served to reinforce the marketing paradigm
so that many have been led to believe that the marketing concept has
been validated. Now, however, evidence is mounting that contrasts this
position:

Given its widely acknowledged importance, one might expect the
concept to have a clear meaning, a rich tradition of theory development,
and a related body of empirical findings. On the contrary, a close
examination of the literature reveals a lack of clear definition, little
careful attention to measurement issue, and virtually no empirically
based theory. Further, the literature pays little attention to the
contextual factors that may make a market orientation either more or
less appropriate for a particular business (Kohli and Jaworski 1990, p.
1).

The current American marketing paradigm (first developed in the
1950s) advocates that the organization must analyze customer needs and
wants, and then produce products or services to fill those needs and
wants at a profit. Therefore, it is hypothesized that organizations that
continue to meet internal and external customer needs and wants will
prosper, while those that do not will decline.

Kotler defines marketing as "a social and managerial process by
which individuals and groups obtain what they need and want through
creating and exchanging products and value with others" (1988, p.
3). This definition of marketing emerges from the earlier work of Peter
Drucker: "There is only one valid definition of a business purpose:
to create a customer.... It is the customer who determines what the
business is.... Because it is its purpose to create a customer, any
business enterprise has two -- and only these two basic functions:
marketing and innovation"(1954, p. 37).

Theodore Levitt contributed to this philosophy when he speculated
(incorrectly) that the railroads did not stop growing because the
requirements for transporting passengers and freight declined. Rather
"they defined their industry wrong....because they were
railroad-oriented instead of transportation-oriented; they were
product-oriented instead of customer-oriented" (1960, p. 45).

Levitt's example, from one of the most quoted Harvard Business
Review articles, has little if any historical justification (Morris
1990). American railroad managers were no more myopic than those in
Canada, Japan and Western Europe. U.S. government regulatory policy
(followed by the concentration of resources) shifted to truck, auto and
air transportation after World War II. Government regulations, not
misguided management or poor marketing practices, kept the railroads
from expanding:

These statutory restrictions (sec. 5(2) (b) of the I.C. Act and
408(b) Civil Aeronautics Act prevent a railroad acquiring an air line or
highway carrier, or any other surface common carrier acquiring an
airline, unless such highway or air transportation is auxiliary or
supplemental to its main operations. This applies not only to
acquisition, but to new lines or extensions. (Pan American Airways Co.
v. Civil Aeronautics Board, -- 121 FED(2d)810(1941). (Tedrow 1951, p.
139,140)

Such condemnation of the railroads, oil, film and auto industries was
more a reflection of a particular anti-big-business stance than a
balanced, historic interpretation of the reality of economic
concentration. While Americans were advocating and orchestrating one
point of view, Asian and European competitors were following another.

Market Power

A customer component (means) can be successful as part of a market
power framework, but not as a separate needs and wants functional
philosophy. Examples will demonstrate that marketing in the United
States has been based on a customer orientation, while global
competitors have developed a different perspective of customers within
the more encompassing orientation of market power. This difference in
approach enables Japanese, Korean, Taiwanese and German firms to grow
into globally dominating organizations. American firms that continue to
segment markets in an effort to satisfy customers do it at the expense
of their international and national competitiveness.

The concept of market power has had several definitions: "A
dominant firm structure is one in which a firm is able to control to a
degree that competitive environment in which all firms operate"
(White 1983, p. 3); "Market power is therefore not so much a
capacity to do something as the ability to prevent others from doing it
also" (Kingston 1984, p. 9); "One of the most important
determinants of economic performance is market power, or the abilities
of firms to influence the prices of their products either through
independent actions or through actions coordinated with others"
(Baldwin 1987, p. 3). Market power is the use/employment of organization
capacity to direct and block actual, potential or presumed competitors
from access to targeted markets. Marketing, human, physical, intangible
and financial resources are then utilized to block competitors from
access to targeted markets and not as competing functional areas (Morris
1992). Historically, market power has not been given a role in the
development of American marketing philosophy.

Global Organizations Utilize Market Power

A fundamental change in philosophy is required, or the economic
future of the nation will continue to be in jeopardy. Competitors in
Asia and Europe have developed a different historic view based on market
power. American companies acquired market power first through isolation
and natural resources, and then internationally with an intact
industrial complex after World Wars I and II. But because of the present
misperception that this was, or is, based on a needs and wants
philosophy, we are now in danger of losing market power to international
competitors who have taken an economic approach similar to Japan's.

A market power approach of unifying and applying national capacity
has been in effect in Japan since the last century, following the end of
the 300-year-old Tokugawa shogunate in 1868. It was replaced with an
imperial form of government under Emperor Meiji. During the Tokugawa
era, Japan was ruled by a samurai class that resisted all outside
intervention. With Commodore Perry's limited opening of Japan in
1853, the ruling class realized how vulnerable they were to Western
military might. This issue of how to deal with the West led to the
collapse of the shogunate (Latourette 1946). Although the imperial
position was originally opposed to the opening of Japan, this position
changed immediately after the collapse of the shogunate. The Japanese
then learned and did whatever it took to become a world military and
economic power. The best minds of Europe and America were brought to
Japan to assist in this transformation. However, when the Japanese
believed they were able to continue without assistance, the Westerners
were sent back home.

A two-tier, market power based economic structure, with one tier for
the internal market and one for the external, was developed. The
government supported and created large businesses and financial
organizations to handle external trade. These organizations (zaibatsu)
were then turned over to ruling families such as Mitsui, Mitsubishi,
Sumitumo and Yasudo. Internal competition for the zaibatsu was
nonexistent. In 1932 the military became dissatisfied with the
zaibatsu's lack of enthusiastic support for its expansion policy,
so it created its own zaibutsu: Nissan, Nihon Chisso, Nihon Soda and
Showa Denko. At this point the original zaibatsu families began to
support expansionist military policy.

At the conclusion of World War II, in an effort to duplicate Franklin
Roosevelt's New Deal anti-monopoly philosophy in Japan, General
Douglas MacArthur dismantled the zaibatsu and purged top management. But
the United States government did a complete about-face in policy towards
Japan in 1947 because of the Communist success in the civil war in
China.

In 1949 the Anti-monopoly Law was revised and a definition of
competition inserted which made the law a dead letter. After 1951 a
number of business combinations began to emerge, linked by ex-Zaibatsu
personnel and by common relations with the four or five largest banks.
In 1952 the Diet removed the ban on the use of Zaibatsu names and many
companies have now resumed their old names. In 1953 the Anti-monopoly
Law was again revised and cartels made legal (Tiedemann 1955, p. 92).

The zaibatsu, now called keiretsu, were encouraged and supported
along with other companies such as Toyota and Sony. When the Korean War broke out in 1950, Japan became a major military supplier, which once
again made Japan a rising industrial power.

Japanese culture was prepared to return to and accept the
concentration and application of resources necessary to block
competition in a global marketplace to achieve a collective national
end. The United States encouraged and supported this continued effort to
restore the former business structure in order to accelerate
Japan's recovery. Japan has been, and continues to be, successful
in the use/employment of market power to develop its national interest.
The needs and wants of internal customers have a low priority as
compared to the concentration of resources to block competitors from
attaining market share in home and foreign markets (Kingston 1987).

American marketing academics are now pointing to the Japanese
emphasis on quality as an example of what the American marketing concept
should be. According to this argument, the Japanese are succeeding
because they are customer oriented and are giving the customer
top-quality products at the lowest prices. Many academics laud
individuals like Edward Deming, the father of quality control, who
supposedly converted a nation of junk producers to a nation of
manufacturers of the best quality products in the world. This position
has no historic substantiation. Japan has produced quality products for
its home market for centuries. Quality has been an important part of
Japan's culture for a thousand years.

Modern Japan's inventive talent, her workmanship and her capital
as well as her potential markets have thus to satisfy two distinct
demands -- (1) for Western goods and (2) for traditional Japanese goods
-- while her older, more experienced and financially stronger
competitors in the West are freed from this complication. It should be
emphasized, furthermore, that the production of the innumerable
commodities manufactured solely for Japan's home market is not
confined to small plants employing craftsmen, and economically and
socially representing the "old" Japan. On the contrary, the
manufacture of these goods has been one of the chief tasks of modern
Japanese factories (Stein 1935, p. 16-17).

Producing quality products has not always been the correct strategy
when access to foreign or domestic markets is blocked. The environment,
competitors and economic conditions determine the approach to product
quality. The Japanese, by design, produced low quality items for export
because the British were able to block access to the high end of the
market before 1940. During the worldwide depression of the 1930s and
after World War II, Japan entered the low end of the foreign market
because the available customers who were in that segment of the market
could afford only low-quality, low-priced items; in addition there were
barriers at the high end. Competitive conditions and resources dictate
action, not a single-solution approach such as customer needs and wants
or quality. The world, unfortunately, is more complicated.

Japan, Korea, Germany, France, Taiwan, Great Britain, the Netherlands
and, indeed, all nations have developed varying views of the application
of market power. European and Asian approaches are much more similar to
each other than they are to the American model. The Taiwanese have their
Da Chi Yeh Chia, the Koreans their Chaebol, the Germans their Kartels
and the British and Dutch had their trading companies. Americans, in
contrast, have had the Sherman Antitrust Act since 1890.

Nevertheless, a closer look at the record suggests that underlying
national differences continued to leave their mark on regulatory policy.
Each country had its own mode of supervision, its own politics of
regulation, its own way of dealing with price cutting, and resale-price
maintenance. Public policy continued to reflect the fact that large
enterprise functioned in distinct and distinctive national milieus
(Keller 1980, p. 171).

The European community in 1992, including a unified Germany, is going
to combine national capacity to create one of the largest single markets
in the world. Barriers will be lowered among the twelve member nations.
The EEC will have common internal regulations, directives, decisions,
recommendations and opinions. The needs and wants of European customers
may be filled by member nations blocking outside access with market
power.

The American marketing theory of the needs and wants of customers,
now with the addition of a quality component, can do little to overcome
these obstacles. Thus, the American government is starting to create
market power by negotiating free trade agreements with Canada and
Mexico. This is an attempt to apply market power based on Asian and
European strategies. Such a reorganization of our economy goes well
beyond the concept of customer needs and wants. It is market power, or
blocking competitors access to targeted markets through the utilization
of all of its resources, that will allow America to become competitive.

Conclusion

Intuitively, we realize utilization of a dominant customer needs and
wants concept is not sufficient to sustain organizational growth,
survival and development. Yet the philosophy persists in the United
States as part of a continued anti-big-business position that is unique
to the country. What is advocated is the incorporation of the customer
(means) into a market power framework. Customers are one component (and
often not the most important one) that may or may not be applied to
achieve a clearly defined end.

Why has the American marketing community been slow to accept a more
encompassing market power paradigm rather than a narrow, customer
orientation paradigm? American industries such as the automobile,
television, and machine tools have deteriorated over the past 30 years
because of an unwillingness to adapt. American business practice was not
required to change. The old international traders of England, Germany,
France and the Netherlands (now combining as part of the European
Economic Community) were devastated after World War II. With the
assistance of the United States, these countries were rebuilt to serve
as a buffer against Communism. These nations have been much more active
in international trade; and their regulatory, legal and social systems
support this activity. With the twin effect of a financially strong
Japan and the reality of a unified Europe, the true marketing myopia is
ours. We continue to follow the limited marketing view which is based on
how the world should be rather than how the world was or is.

There has been success in the application of market power in the
United Slates. For example, NEC of Japan is blocked from entering the
U.S. telephone industry by government regulation. Australian farmers are
blocked from American agricultural markets. These blocking strategies
are an example of the required market power paradigm shift, applying
organizational capacity that blocks competition from access to targeted
markets. A use/employment of market power is advocated from the position
of enlightened self interest. A rethinking of the philosophy of needs
and wants must occur if we are to compete with foreign firms trading
both at home and abroad. American businesses, like others, must improve
their capacity to block competition from access to targeted markets.

Drucker, P. 1954. The practice of management. New York: Harper and
Row.

Keller, M. 1980. Regulation of the large enterprise: The United
States experience in comparative perspective. In Managerial hierarchies:
Comparative perspectives on the rise of the modern industrial
enterprise, ed. A.D. Chandler, Jr. and H. Daems, 161-181. Cambridge,
Mass.: Harvard University Press.

Kingston, W. 1984. The political economy of innovation. The Hague:
Martinus Nyhoff.

David J. Morris, Jr. is Associate Professor of Marketing at the
University of New Haven, New Haven, Connecticut and David C. Kimball is
Assistant Professor of Marketing at Elms College, Chicopee,
Massachusetts.

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